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Meramec Funding Sources

Environmental Incentives or Pay-for-Performance

Environmental Incentives or Pay-for-Performance

Aug. 1, 2019
By WSU EFC

Story summary:

  • Environmental incentives, or Pay-for-Performance, is an economic incentive program that links payment to measurable outcomes. Environmental incentives focus on project effectiveness not the lowest-cost.

Quick Facts

Benefits of Environmental Incentives
Reduces risk of funding ineffective projects

Shares risk

Incentivizes long-term O&M

Leverages private dollars

Streamlines regulatory compliance

Increases public trust

May help leverage grant funding

Drawbacks of Environmental Incentives
Starting from scratch may be daunting

Time and effort to manage the program may be large

Private investors may be difficult to recruit (but maybe not)

About

Environmental Incentives, also known as Pay-for-Performance, are a financial incentive for private companies, private property owners or government agencies to implement projects that reduce runoff. Links payment to delivery of verified pollutant or stormwater load reductions.

A basic pay for performance model includes:

  • Pay for Performance Contract – defines terms
  • Service Provider – designs and completes project
  • Environmental Outcomes – quantified and verified
  • Local Government – pays based on pollutant load reduction or volume of water retention

Types of Pay for Performance:

  • Partial – initial payment to implementer to cover some or all costs and secondary payment once load reductions are verified
  • Full Delivery – ties payment to measurable outcomes
  • Entrepreneurial Banking – private sector organizations fund stormwater projects and co-permittees purchase load reductions after they have been certified as credits. All financial agreements are private transactions.

For-profit companies mentioned or listed are not endorsed or recommended by the WSU EFC, but are simply used here as examples and for educational purposes. 

 Project Examples

Lake Tahoe, CA

Lake Clarity Crediting Program
Since 2011, the Lake Clarity Crediting Program has been measuring and setting load reduction targets for key pollutants that every city, county and highway maintenance agency must achieve. The targets, “credits,” can be traded to meet requirements.

Mokelumne River, CA

Mokelumne Watershed Environmental Benefits Program
The Mokelumne Watershed Environmental Benefits Program provides private and public land managers incentives to implement practices that ensure long-term watershed sustainability. By creating a framework where environmental benefits are tracked and traded, the program encourages cost-effective investments in forest, meadow and streamside restoration.

More Info/Resources

 

Consult your community’s attorney and financial advisors prior to moving forward with any of these funding options. Any reference in this website to any person, or organization, or activities, products, or services related to such person or organization, or any linkages from this website to the website of another party, do not constitute or imply the endorsement, recommendation, or favoring of companies or organizations.
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